In practice, overbooking often leads to conflicts
As Deutsche Welle notes, this practice is based on statistical data collected over many years, according to which a certain percentage of passengers do not show up for the flight for various reasons. This rate varies among airlines, as it is an internal corporate calculation. For German Lufthansa and British EasyJet, it is about 5 percent; Russian Aeroflot recently announced a figure of 10-15 percent.
But if the percentage of no-show passengers is an internal matter for the airline, the legal framework for overbooking falls under the authority of the state. In the US and most EU countries, there are detailed regulations governing passenger rights and carrier obligations. In Russia, overbooking has not been prohibited until now, but it was used tacitly, which posed a risk for both passengers and airlines. Passengers who missed their flight could only rely on the carrier's mercy. And airlines faced lawsuits from the most active citizens seeking compensation. As a result, at the end of June, the Russian Ministry of Transport published a draft law regulating the practice of overbooking and compensation payments. The law is expected to come into force in the second quarter of 2016.
But why did Russia suddenly remember the unregulated nature of overbooking practice? The initiator of the bill was the largest Russian airline Aeroflot, and the increased interest in the topic itself is easily explained. Overbooking is an effective way to increase aircraft occupancy and, consequently, improve the financial position of airlines. At Aeroflot itself, according to its CEO Vitaly Saveliev, legalizing overbooking is expected to increase annual revenue by 7 percent. And this is now strategically important for all Russian airlines without exception.
None of them feel confident now, from industry leaders to regional companies. The crisis in the Russian economy and the devaluation of the ruble have led to a sharp decline in performance on international routes, while the costs of maintaining imported aircraft have remained unchanged – and not in rubles, but in foreign currency. With the drop in passenger traffic, an excess in the fleet has also emerged. Simply put: Russian airlines now have more aircraft than they need, but they still have to pay for their leasing.
Against this background, airlines have repeatedly turned to the Russian government for help – and partially received it, in the form of a reduction in VAT on domestic routes and loan guarantees. But this is clearly not enough, so overbooking comes in handy now.
In Russia (and worldwide), overbooking is usually supported by airlines and opposed by consumer protection societies. However, there are exceptions: in the discussion that flared up after the Russian Ministry of Transport's proposal, one of the industry leaders, the airline Transaero, spoke out against selling tickets without guaranteed seats, according to Russian media reports. They pointed out that in Russian conditions, where there are many routes with low flight frequency, a passenger who misses a flight may have to wait for the next one for several days – and will definitely miss connecting flights if any are planned. Moreover, according to opponents of overbooking, airlines traditionally inflate the percentage of no-show passengers. The practice of rebooking places additional strain on the carrier's staff and damages the company's image.
And how does overbooking work in the West? If more passengers show up for a flight than there are seats, the airline must first find those willing to voluntarily give up their seat. They may be offered to rebook on the next flight in business or first class, receive additional bonus miles, discounts on the next ticket. Additionally, they may receive vouchers for meals, hotel, access to the airport business lounge.
If there are no volunteers, the carriage contract is canceled for one of the passengers who firmly intended to fly. They are refunded the ticket price and paid compensation. The amount is clearly specified: for example, with Lufthansa, for routes up to 1500 km it is 250 euros, from 1500 to 3500 km – 400 euros, from 3500 km – 600 euros. However, the amounts may be reduced if you still decide to take another flight offered to you.
In principle, airlines worldwide are not inclined to share their overbooking statistics. Thus, most of the airlines contacted did not respond to the corresponding request. Lufthansa only clarified that the number of no-show passengers for this airline is 1.8 million people per year. And that is no less than about 3,500 empty A380 aircraft. However, the probability that you will not get on a flight while holding a ticket is not high. According to statistics from the US Department of Transportation, only one in 10,000 passengers has their carriage contract terminated without their voluntary consent.